THE CHEQUERS CONCLUSION - Briefing Memo by Martin Howe QC

​Martin Howe QC's analysis of the government's proposals for negotiating Brexit makes it quite clear that Brexit does not mean Brexit.

1. This memo is based on the press statement issued by the government on 6 July 2018, which lacks details in a number of key areas. However, some important conclusions can be drawn very clearly.

Para 4(a): the "common rulebook for all goods including agri-food".

2. A "common" rulebook? Although the phraseology is expressed as beingthat the UK and EU would maintain a "common" rulebook for all goodsincluding agri-food, this would only be "common" in the sense that theUK would have to obey and apply in complete detail the lawspromulgated by the EU without having a vote on the content of thoserules. Further, it is clear from 4(c) (dealt with below) that the UK wouldbe obliged to interpret these rules in accordance with rulings of the ECJunder a system which would (whether directly or indirectly) bind UKcourts to follow ECJ rulings. In areas where rules relating to goods areapplied in a discretionary way under the control of EU regulatory bodies,it is inevitable that the application of the rules in the UK and UKregulatory bodies would continue to be bound by the decisions of EUbodies in the same way as if the UK were still a member state butwithout a vote or voice within those institutions. This would amount toa permanent vassal relationship in the area covered by the 'common'rulebook.

3. Ability to change current laws? There is no indication in the text of thestatement that the UK would have any ability to change any of theexisting body of EU laws, however damaging they may be or become inthe future - for example where restrictive EU laws block the developmentor deployment of new technology, such as in the biotech area where theUK has a huge opportunity to develop its leading industry and to sell itsexpertise and products around the world. In order supposedly to benefitthe 12% of our economy which consists of exports to the EU, we wouldaccept a binding obligation to freeze the laws which cover 100% of oureconomy consisting of domestic production and also imports from thirdcountries (see further below). In political and constitutional terms, itwould mean that Parliament would not be free to alter laws in the fieldcovered, however strong the wishes of voters. The present democraticdeficit whereby Parliament is unable to alter laws in the field covered byEU competences would be worsened, since UK voters would lose theircurrent (limited) ability to press for changes to EU laws via the UKgovernment of via MEPs.

4. Obligation to follow future changes to EU laws. The statement tells us thatthe UK would "commit by treaty to ongoing harmonisation" in the areacovered by the EU rulebook. First, it states that Parliament would have"oversight of the incorporation" of new EU rules into UK law, whichsuggests simply the continuation in substance of the current EU setupwhereby most changes to UK law in order to implement EU directives aremade by statutory instrument under s.2(2) of the European CommunitiesAct 1972. In practice, most such SIs are made by negative resolutionprocedure and so Parliament exercises "oversight" only in the sense ofnot exercising its theoretical right to vote down an SI.

5. Secondly, it is said that Parliament would have "the ability to choose not to"incorporate future changes into UK law "recognising that this would haveconsequences". It would appear that the government will request atheoretical right not to implement future EU law changes but in returnwill accept a treaty which allows the EU to impose "consequences" if thistheoretical right were to be exercised. It is worth noting that a similartheoretical right under the EEA Agreement not to follow future changesin EU internal market laws has never been successfully exercised, withNorway being force to back down in 2013 from its refusal to implementthe Postal Services Directive in the face of threatened countermeasuresby the EU. Thus, it would appear that this reference to a theoretical rightfor Parliament to block new EU laws is included for reasons of politicaltokenism and is unlikely to be of real practical value.

6. Impact on UK's international trade policy. In addition to hobbling the UK'sdomestic economy, the so-called 'common' rule book would require theUK to apply EU laws against imports from third countries. Most tradeagreement today are about far more than tariffs, but deal with theremoval or reduction of non-tariff barriers which arise from differingregulatory laws or systems. Most developed countries have in place lawswhich deal satisfactorily with, for example, keeping dangerous food,medicines or other goods off the market, but the details of those lawsmay differ widely. Therefore "mutual recognition" involves accepting thatgoods from another trade partner and which satisfy their own laws onthe subject of, say, food safety, are not going to poison people ifimported, so should be allowed in. An obligation to follow the EUrulebook on goods would prevent the UK from entering into mutualrecognition agreements on goods.

7. This problem is particularly acute in the area of agriculture and food,where many aspects of current EU laws are not based on genuine safetyissues or scientific principles, but rather are framed in order to protect EUproducer interests and methods against imports from outside the EU. Aparticularly egregious example are the EU's current unscientific andtechnophobic rules against improvement of crops or livestock using DNAtechnology. The USA in particular has (under all colours ofadministrations) had a long standing objection to the EU's unscientificand protectionist rules in the agriculture field, and the idea that the USAwould accept a trade agreement with the UK in which the UK maintainsthe EU's existing corpus of non-tariff barriers against US imports is forthe birds. Similar objections would be likely to arise on the part ofAustralia given its large agricultural export interests, so this "commonrulebook" policy is likely to destroy at one stroke the two most attractiveand achievable post-Brexit free trade agreements for the UK.

8. Scope of the "common rulebook". The area of EU laws which the UK wouldbe obliged to apply is said to be "only those necessary to provide forfrictionless trade at the border." However at minimum this would cover alllaws and rules which have to be complied with by goods placed on thesingle market, including those regulating methods by which they areproduced, inspections and certificates, etc, and rules relating to how theyare packaged and presented on the market. This is a very wide fieldindeed. An example is the detailed EU rules on the requirements forlabelling vacuum cleaners with energy test results, which were framed bythe Commission to require tests to be performed in a way which gave anadvantage to German manufacturers over Dyson's more efficient baglessdesigns. These particular rules were successfully challenged at one stageby Dyson in the ECJ (Case C-44/16 P Dyson Ltd v. European Commission,11 May 2017), but more recently Dyson may suffer a reverse since an ECJAdvocate-General has expressed the view that EU law does not permitDyson to display supplementary information about its own testsalongside the officially required EU flawed energy tests: Case C-632/16Dyson Ltd v. BSH Home Appliances NV, AG Opinion 22 Feb 2018 - theECJ's judgment is expected.

9. The Dyson case illustrates how the EU regulatory system for goods canalready be skewed in favour of Continental interests and against Britishmanufacturers. More significantly, the system is skewed in favour ofexisting technologies and against innovators. Once we leave the EU andno longer have a vote on the framing of these type of rules, the EU willhave a positive incentive to frame its rules in order to disadvantage UKproducers who will be obliged to follow those rules.

Para 4(b): "reciprocal commitments related to open and fair trade"

10. While it is normal for Free Trade Agreements to contain some flankingprovisions relating to open markets and state subsidies, the width anddetail of what is proposed is far greater than would be accepted oracceptable in an agreement between any independent country and theEU. There is a commitment to apply a "common rulebook" on state aid.While the principle of restricting state aids is acceptable, this would implythe acceptance of the EU's detailed state aid rules, so not allowing theUK to apply such rules flexibly and with the interests of its industries inmind.

11. Of even more concern is that the UK would agree "to maintain highregulatory standards for the environment, climate change, social andemployment, and consumer protection - meaning we would not let standards fallbelow the current levels." (Emphasis added). The problem with this is nota general requirement to maintain high standards, which we would wantto do anyway, but the commitment not to let standards in these areas"fall below" current levels. Any changes to our rules in these areas whichimproves the competitiveness of UK industry would almost certainly beinterpreted by the EU as allowing our standards to "fall below" currentstandards. This commitment is therefore an extremely dangerous one toundertake, particularly if it were linked to a binding enforcementmechanism and even more so if that binding mechanism ultimatelybecomes the ECJ (see below).

Para 4(c): "consistent interpretation and application of UK-EUagreements" - putting the UK on a par with Moldova

12. This paragraph first states that the interpretation and application of UKEUagreements would be done "in the UK by UK courts, and in the EU byEU courts." This is what one would expect with any treaty arrangement.This subject has been covered in depth and the principles explained in"Adjudicating Treaty Rights in post-Brexit Britain: Preserving Sovereignty andObserving Comity". (Paper by Martin Howe QC, Francis Hoar and Dr Gunnar Beck, available from Lawyers for Britain at http://lawyersforbritain.org/adjudicating-treaty-rights-in-post-brexit-britain) Put shortly, there is nothing wrong with the courts of the parties to an international treaty looking at each others' judgments, reading them with mutual respect, and trying to be consistent with eachothers' interpretation if they can. This is indeed a general principle of international judicial comity in the interpretation of treaties.

13. However, it is important that this process should be mutually balanced(i.e that the ECJ and Member State courts should pay just as muchattention to judgments of UK courts as vice versa), and absolutelyessential that it be non-binding. Para 4(c) indicates that "due regard" willbe paid to EU case law in "common rulebook" areas. This lacks mutuality- there is no suggestion that EU courts should pay "due regard" to UKcourts, immediately unbalancing the relationship and placing UK courtsin an inferior position. More importantly, the phrase "due regard" willbe coloured by the ECJ reference procedure mentioned later in thatparagraph.

14. The paragraph states that there shall be a dispute resolution procedureinvolving in many areas "binding independent arbitration". This iscommendable. Indeed, as we argue in the Adjudicating Treaty Rightspaper, (See previous note) a neutral and balanced (ie. balanced between the UK and EU,with a neutral chairman) international arbitration mechanism is thenormal and appropriate mechanism by which parties to internationaltreaties agree to resolve their disagreements, and is the normalmechanism contained in the EU's own trade and association agreementswith non-member states.

15. However, para 4(c) goes on to indicate that the binding "independent"arbitration procedure will accommodate "through a joint reference procedurethe role of the Court of Justice of the European Union (CJEU) as the interpreterof EU rules, but founded on the principle that the court of one party cannotresolve disputes between the two." This Delphic and seemingly selfcontradictorysentence is extremely important, and needs to be carefullyunpacked to be understood.

16. The first point to appreciate is that the ECJ has held that, if issues of EUlaw are referred to it, its answers must be binding. In its formal Opinion1/91 on the proposed EEA Court, it said:

"61 ... it is unacceptable that the answers which the Court of Justicegives to the courts and tribunals in the EFTA States are to be purelyadvisory and without any binding effects. Such a situation wouldchange the nature of the function of the Court of Justice as it isconceived by the EEC Treaty, namely that of a court whosejudgments are binding."

17. Therefore it is impossible to implement the proposed "joint reference"procedure without the ECJ's rulings being given binding effect, whichwill necessarily overrule any contrary judgments of the UK courts. Thisenvisaged "joint reference" procedure would appear to be based on theprocedure in the EU-Moldova Association Agreement. In preparation forits hoped for accession to the EU, Moldova has agreed to align wide areasof its domestic law with EU law, and also to align the interpretation ofthat law, in preparation for its hoped-for accession to the EU. The keymechanism by which this convergence in interpretation is to be achievedis, under Article 403(2) of the EU-Moldova Association Agreement, anobligation on the arbitral panel in an EU-Moldova dispute to refer issuesof interpretation of provisions of the Agreement which reflect EU law tothe ECJ, rather than deciding those issues for itself. Although formallyit is the function of the arbitral tribunal to rule on the dispute betweenthe EU and Moldova, where the dispute is over the content of the EUbased rules which Moldova is to apply, it is the ECJ which has the solepower to rule on the issue. Thus the closing words of para 4(c) of theChequers statement - "the principle that the court of one party cannot resolvedisputes between the two" are formally correct, but are in fact empty ofsubstance if this mechanism is used.

18. One can see the logic of entering into that kind of relationship from thepoint of view of a country which is aligning its laws in preparation formembership, but it is wholly incompatible with the status of the UK asan independent state when it has departed from the EU. When we leavethe EU on 29 March 2019, the ECJ will cease to be a multi-national courtin which we participate alongside other members, and will become anentirely foreign court owing its loyalties solely to the EU itself and itsMember States. It is virtually unheard of in international relations for anyindependent state to agree to be bound by the organs of the other treatyparty if there is a dispute over the interpretation or application of treaty.As a practical matter, the UK's treaty obligations in the relevant areas willbe like signing a blank cheque on which the detailed words can bewritten in by an organ of the EU. By participating in this mechanism, theUK will be placing itself lower than any other independent state whichhas a treaty with the EU, and on a par with Moldova.

19. The existence of this mechanism will in turn affect the approach of theUK courts to how they interpret and apply the concept of paying "dueregard" to ECJ jurisprudence. While (it would appear at least) directreferences from UK courts to the ECJ will cease, (except in citizens' rights cases where the UK has already conceded that such references may continue to be made in cases which commence up to 8 years after 31 Dec 2020) it is likely that the UK courts will reason that their is no point in them departing from EU caselaw, even if they disagree with it, since it will just end up in an arbitration in which the issue will be sent to the ECJ whose ruling willthen be binding on the UK. The courts adopted very similar reasoning indeciding that they were effectively bound to follow clear and consistentjurisprudence from the Strasbourg Court when applying the HumanRights Act 1998, even though the Act itself merely required the courts to"take into account" Strasbourg Court rulings.(R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323.)

20. Para 4(c) does not make clear what areas will be covered by this "jointreference" procedure, but presumably at least the whole "commonrulebook" area would need to be covered, or at least the EU would insiston that. In the areas covered by the "joint reference" procedure, even ifformally instructed to pay "due regard" to it, the UK courts are likely totreat the case law of the ECJ as effectively binding and in any event if theydo hold to a view contrary to that of the ECJ it is likely that that view willeventually be overruled via the arbitration and joint reference procedures.So while the direct route of preliminary references from UK courts to theECJ will be ended, it will still remain the case that as a matter ofsubstance UK courts will be bound by the future jurisprudence of the ECJin the areas covered by the "joint reference" procedure.

21. The claim made in para 6(g) of the Chequers statement that this proposalwould "restore the supremacy of UK courts" is therefore simply not correct.While the mechanism by which our courts would be overruled by the ECJwould be changed to one that is more indirect, they would remainsubject to the ECJ's case law.

Para 4(d): "Facilitated Customs Arrangement"

22. This paragraph is very difficult to understand in the absence of anydetail. However, the first and most obvious and indeed important pointis that the attempted introduction of the "FCA" would cause significantdelay before the UK can leave the EU customs union and choose to setits own tariffs, whether by unilaterally changing them or abolishing themagainst free trade partners. We are now already over two years after thereferendum. It beggars belief that it should be contemplated thatadministrative issues about customs processes could be allowed to dictatethe whole trading future of the UK by preventing us from implementingtariff changes even after the end of the implementation period (31 Dec2020 - 4½ years after the referendum). Yet this seems to be the messageof this paragraph. This would be severely damaging to the politicalprospects of the government and of the Conservative Party, since itwould remove the chance of giving tangible benefits of Brexit before thenext general election to low income families by removing or loweringtariffs on goods, particularly those where the UK has no or limitedproducer interests to protect.

23. The multiple problems of the so-called New Customs Partnership (NCP)were addressed in a 30-page briefing note which has become publiclyavailable. (https://europeanfoundation.org/customs-partnership-briefing/) The FCA attempts to address (as far as one can see from this text) only one of those numerous problems, which is that under the NCP, EU-level tariffs would have to be collected on all imports to the UK fromthe EU, and then importers would have to claim a rebate in order toimport tariff free. It does so by indicating that EU level tariffs would becollected on goods shown to be destined for the EU, and UK level tariffson goods destined for the UK, leaving only a residual "uncertaindestination" category (claimed to be a small percentage of imports) towhich the "pay the higher rate and claim rebate" system would apply.

24. The problem with this solution however is that goods which are declaredon importation as "UK destination" then need to tracked down thesupply chain in order to make sure that they really do end up at a UKconsumer. This entails the need for a tracking mechanism in order totrack individual goods down supply chains, imposing costs on businessesimporting goods for UK consumption and upon their customers who sellon the imported goods in turn. It is most unlikely in any event that theEU would be satisfied that such a system would be sufficient to preventleakage of goods into the EU. But more fundamentally, it would appearthat this system is vulnerable to a successful challenge that it breaches thenational treatment principle in GATT Art. III. This is one of the mostfundamental principles of the WTO system. WTO Members are notallowed to impose burdens on imported goods (apart from permissibletariffs levied at the point of importation) which treat those goods lessfavourably than nationally produced goods. The obligation to subjectgoods imported from WTO Members to burdensome tracking obligationsto which nationally produced goods are not subject would appear to besuch a prohibited measure under GATT Art. III.

25. The FCA introduces a new problem compared with the NCP, in that (atleast as far as one can see from the paragraph) there is no means ofpreventing goods flowing into the UK via the EU which come fromcountries against which the UK is imposing higher tariffs than the EU.This would come about (1) when the UK imposes trade protectionmeasures (e.g. anti-dumping duties) on goods from a country and the EUhas not matched those UK measures itself; and (2) where the EU hasentered into a free trade agreement with a country where the UK doesnot have a matching FTA. Imports from that country could then flow intothe UK tariff free by travelling via EU ports, so undermining the UK'snegotiating leverage in getting the country concerned to enter into anFTA with itself. But there seems no suggestion that the EU will be askedto undertake reciprocal obligations (ie. collecting UK level tariffs on goodsbound for the EU when UK tariffs are higher, and imposing trackingobligations on third country goods imported into the EU in order to makesure that they do not migrate into the UK). Indeed even where the tariffsare the same, there seems nothing to prevent companies importing theirgoods into EU ports for reasons of pure convenience and paying thetariffs on UK consumed goods to the EU rather than the UK.

26. Further, there is no answer, at least in this short text, to a fundamentalproblem with the NCP to do with Rules of Origin Controls. That problemis that an FTA between the UK and the EU would not mean that UKmanufactured goods would be entitled to enter the EU tariff free. Thatwould only apply if the goods satisfy rules of origin controls as"originating" in the UK. For example, cars assembled in the UK with anon-EU non-UK content above a certain threshold would not count as ofUK origin for tariff purposes and the EU would be entitled, and indeedbound under WTO rules, to collect import tariffs on such cars. It is notsufficient just to collect EU level tariffs on the components: that wouldnot satisfy WTO rules. This means (in the absence of some mysteriousand magical solution within the details of the White Paper) that customscontrols will still be required to operate between the UK and the EUunder the FCA, so destroying its central point.

27. It is hard to take this latest evolution of this long running saga as aserious proposal capable of actual implementation. Rather, it seems to bea plan put forward in order to cause delays to the inevitably necessaryprocesses of implementing post-Brexit customs controls between the UKand the EU. (Which does not mean that they must be enforced by means of physical installations at the Irish land border.)

The negotiation process

28. These Chequers proposals are the starting point rather than the end pointof the negotiating process, and therefore any final deal (if a deal isnegotiated) is likely to contain further concessions above and beyondthose proffered up by the UK at this stage. It will not be acceptable forthe EU to permit the UK to (as it puts it) "cherry pick" the goods elementof the single market, without also accepting the obligations of the ruleson services, the rules on the free movement of persons, and theobligation to contribute to the EU budget for reasons of claimed"solidarity".

29. However it is unlikely that the EU will reject these proposals outright.Rather, it will suggest that they go some of the way but not far enough,and keep the UK inside the "lobster pot" delaying the UK's no-dealconcessions until time runs out and the EU can demand furtherconcessions in return for graciously "granting" the transition period. Weare therefore firmly on course for a "Black Hole" Brexit in which the UKcontinues to be subject to most of the obligations of EU membership, isfirmly stuck in the EU's regulatory tarpit and prevented from developingour economy away from trade with the EU towards trade with the restof the world. We will be unable to take advantage of the freedom of Brexit toimprove the competitiveness of our economy or respond to the demandof our citizens for changes to the laws which govern us, and we will nolonger have the voting rights and treaty veto rights which we enjoyed asan EU member state.

30. It is sometimes said that it is best to get any deal on leaving the EU, andthen try to fix it later. This would be extremely difficult. To get out of thewide ranging and permanent obligations which are envisaged, it wouldbe necessary to give notice to terminate the agreement or the EU wouldsimply have no reason to negotiate. Giving such notice would generateProject Fear 3.0 and the same hysterical nonsense that the country wouldbe "crashing out over the cliff edge into the abyss". Further, theenvisaged agreement might contain clauses which lock the UK in legallyfor a longer period, such as an agreement to keep tariffs aligned with theCET unless and until the EU is satisfied with procedures at the Irishborder. At least as an EU member we have the right under Article 50 toleave on 2 years notice; under the proposed agreement we could be leftin the Black Hole without that right.

Conclusions(1) The Chequers proposals would involve the permanent continuationin the UK of all EU laws which relate to goods, their composition,their packaging, how they are tested etc etc in order to enablegoods to cross the UK/EU border without controls. All goods onthe UK manufactured in the UK for the UK domestic market, orimported from non-EU countries, would be permanently subject tothese controls.(2) There would be a general obligation to alter these laws in futurewhenever the EU alters its own laws, with a mechanism forParliament to block such changes which is probably theoreticalrather than practical.(3) This would put the EU in a position to fashion its rules relating togoods so as to further the interests of continental producers againstUK competitors, when we will have no right to vote on those rules.(4) The obligation to follow the EU rulebook for goods would gravelyimpair our ability to conduct an independent trade policy. Inparticular, it will prevent us from including Mutual RecognitionAgreements for goods in trade treaties and this is likely to destroythe prospect of successfully achieving meaningful agreements withsome of the prime candidates such as the USA and Australia.(5) The ECJ jurisdiction proposals would put us in the same positionas Moldova, an applicant/supplicant state which is willing to acceptbinding ECJ rulings on the conformity of its laws with EU law aspart of the preparations for its accession. Quite why this is thoughtto be a suitable model for a country which has left the EU and isthe 5th largest economy is unclear. The supremacy of the UK courtsover laws in the UK would not be restored, contrary to the claimmade in para 6(g) of the statement.(6) The new "Facilitated Customs Arrangement" seeks to solve one ofthe problems of the NCP (collection of EU level tariffs with rebatesystem on goods destined for the UK market) by imposing on UK-destinedgoods the administrative burdens of a tracking system.This would (1) increase the likelihood of this system being foundin breach of the national treatment principle in GATT Art.III, and(2) apparently extend yet further the timescale for implementationof this Heath Robinson system, locking the UK in the mean timeinto the EU's common external tariff, preventing the electoratefrom benefiting from Brexit in time for the next General Election.(7) However, there is no indication at least from what has been madepublic that the FCA has solved or alleviated any of the otherproblems of the NCP proposal. It is not clear how the problem ofrules of origin controls on UK manufactured goods imported intothe EU will be addressed in the absence of customs controls on theUK/EU border, or how this issue can be solved compatibly withWTO rules.(8) These proposals will not be accepted by the EU since in their perception they amount to unacceptable "cherry picking" of the"benefits" of the single market. However the EU is unlikely toreject the UK's position outright, but will instead keep the UKinside a "lobster pot" where it negotiates rather than prepares forno-deal while the negotiation time runs down and when the EUwill demand huge last minute concessions in return for not takingaway the transition period.(9) These proposals therefore lead directly to a worst-of-all-worlds"Black Hole" Brexit where the UK is stuck permanently as a vassalstate in the EU's legal and regulatory tarpit, still has to obey EUlaws and ECJ rulings across vast areas, cannot develop an effectiveinternational trade policy or adapt our economy to take advantageof the freedom of Brexit, and has lost its vote and treaty vetosrights as an EU Member State.

About the author

As an undergraduate at Oxford, Ariane Loening was old enough to vote NO in the 1975 EEC referendum.She gained experience of UN agencies and spent the 1980s in West Bengal working in the voluntary sector at grassroots level, developing a forensic approach to socio-political and economic issues before returning to Scotland in 1993. She values, in particular, knowledge of historical background, believing it to be the best way to understand the present.